China stocks gain on signs tight liquidity is easing

Reuters Staff

3 Min Read

SHANGHAI, June 19 (Reuters) - China stocks rose on Monday, with the blue-chip CSI300 index snapping a three-day losing streak, on signs that tight liquidity is easing and as fewer new listings are expected to come onto the market.

Traders said liquidity conditions improved as the central bank continued to provide funds via open market operations, after injecting a net 410 billion yuan into money markets last week, the biggest weekly injection since mid-January.

Still, authorities appear to have paused their campaign in recent weeks, possibly due to concerns over liquidity or perhaps an indication that they are assessing earlier policy steps to see if they are starting to slow the real economy, as many analysts predict.

"Liquidity conditions have eased as the government has recently decreased its focus on tightening financial regulations," UBS Securities wrote in a report.

Expectations of fewer new listings also supported Chinese stocks on Monday, particularly small-caps whose valuations had been pressured by worries of more equity supply.

The securities regulator approved six initial public offerings (IPOs) on Friday, which was the fourth straight week that the pace had slowed from an average of around 10 IPOs in the past months.

Chinese investors are also awaiting a decision by U.S. index provider MSCI, which will decide on June 20 whether to include A shares in its Emerging Market Index.

The stock regulator said it would be happy for MSCI index inclusion, but Chinese capital market reform will not be derailed without the inclusion.

"The inclusion could bring about 60.7 billion yuan into the (A-share) market, but the impact would be limited if the inclusion does not happen," Haitong Securities wrote.